Thought on VMWare Strategy

I want to share my thought on VMWare’s strategy on hybrid/multi cloud. Disclaimer: I owned a tiny number of VMWare and Dell Technologies stocks personally. As a student, the investment is just the skin I put in the game. I am doing this to share my opinion and see different opinions that you may have.

Software-defined data center

Let’s think about your phone for a second. Your phone, no matter how powerful or new it is, is limited in its storage. After taking enough pictures or videos, the phone cannot store any more data. You either buy a new phone with bigger storage or move the existing data somewhere, either to a hard drive, a desktop or the cloud (like iCloud in the case of iPhones).

The example shows the limitation of being coupled with hardware. Now, think about that from a corporate perspective. When a company accumulates enough data, its infrastructure will need to be upgraded and expanded. Ordinarily, new hardware has to be bought, in addition to the purchase of software licenses. However, the process of buying hardware is time-consuming and can be costly. On top of that, there will be effort spent on configuration, maintenance, patching and updates. All these mundane tasks take away attention of IT staff from developing applications and innovation. To move with speed in this age of data, corporations need to automate and rely less on hardware. Everything needs to be software-based.

Enter Software-defined data center (SDDC).

Software-defined data center is a growing trend in the technology. Simply put, it refers to an architecture in which compute, storage and network are virtualized and delivered as a service. This video from VMWare does a good job on explaining the term.

Some of the benefits of SDDC include automation, quick provisions of resources, switch from capital expenditure to operational expenses and scalability.

Focus on hybrid & multi-cloud

For the cloud &SDDC to work, virtualization is indispensable and VMWare has been the leader in virtualization. Now that everything in a data center such as compute, storage or network is virtualized in SDDC trend, VMWare is in a perfect position to grow and dominate the market.

Each cloud provider has its own unique offerings and is suited for a particular set of workloads. There is no one-cloud-fits-all. Hence, the best cloud strategy for a corporation is to have a hybrid or multi cloud architecture, taking advantage of each cloud’s strengths. The diversity in cloud platforms may help with the workloads, but put pressure on the task of cost and operational management. It’s not easy to manage multiple platforms, especially when some of them offer complex pricing and services. Imagine that you are a purchasing manager taking care of many vendors. The diversity of vendors brings the best product/service in each category to the fold, but it also brings the headache of vendor management. The same goes with hybrid cloud and multi-cloud strategy.

Plus, security is a big issue nowadays. The hybrid/multi cloud structure requires even more focus on security than usual.

VMWare practically pioneered the virtualization of x86 servers. It had some success with the private cloud, but not so with the public cloud area. Realizing that it would be an uphill battle to compete with the likes of AWS, Azure or GCP, VMWare sold its vCloud (its version of public cloud) to OVH.

How has VMWare been doing? Here is a diagram that took into account their M&A and announcements in the past two years that I think are related to the hybrid/multi cloud trend

By partnering with big public cloud vendors and divesting its own public offering, VMWare killed two birds with one stone. It avoided a head-on competition whose result was already predictable for VMWare. By partnering with AWS or IBM, VMWare could leverage their global footprint to sell their software. If corporations already used and loved vSphere and vSAN, why not making it easy for them to use such software on public cloud?

To make its new strategy more sticky to customers, VMWare, as the diagram shows, invests heavily into cloud management and security. I believe that it’s going to continue in the future. At VMWorld 2018, the company announced their initiative in IoT and blockchain, as well as their partnership with AWS on database. Regarding the new initiatives on IoT and blockchain, it makes sense to me. That’s where the industry is heading towards. If the foundation infrastructure is already there, the logical move is to offer companies with the tools and software to build blockchain & IoT applications to solve their business issues.

VMWare is not strong in database. Why not working with AWS’ Relational Database Service to complete the full stack?

All in all, I love what VMWare is doing strategically in terms of hybrid & multi cloud. I agree with what VMWare’s CEO said in the earnings call: “We believe no other enterprise software company is as well positioned as VMware. Customers are increasingly turning to VMware to partner with them to accelerate their digital journeys. Our interoperable cloud mobility, networking and security solutions form a powerful digital foundation for delivering the apps that drive business innovation and business success.”